Sales of Racehorses Subject to Indiana Sales Tax
- Jan 9, 2013 | Gail Cole
Sales of racehorses are subject to sales tax in Indiana. If sales tax is not paid, use tax applies. This is true even when the sale takes place by means of a claiming transaction.
Pursuant to relevant Indiana law, "an eligible person" must "have on deposit with the horsemen's bookkeeper, prior to filing the claim, an amount equal to the amount of the claim, plus all transfer fees and applicable taxes …" in order to "make a valid claim for a horse… ." (71 IAC 6.5-1-5). (Emphasis mine).
This issue was brought to light in a recent letter of findings issued by the Indiana Department of Revenue. LOF 04-20120425 reminds that the Hoosier State "imposes sales tax on retail transactions and a complimentary use tax on tangible personal property that is stored, used, or consumed in the state."
Relevant Indiana law reads:
- "The person who acquires property in a retail transaction is liable for the tax on the transaction and … shall pay the tax to the retail merchant as a separate added amount to the consideration in the transaction." (IC § 6-2.5-2-1).
- "An excise tax, known as the use tax, is imposed on the storage, use, or consumption of tangible personal property in Indiana if the property was acquired in a retail transaction, regardless of the location of that transaction or of the retail merchant making that transaction." (IC § 6-2.5-3-2(a)).
A horse is considered to be "tangible personal property" in Indiana, and is therefore subject to the state sales and use tax. "Tangible personal property" is defined as personal property that: "1. can be see, weighed, measured, felt, or touched; or 2. is in any other manner perceptible to the senses." (IC 6-2.5-1-27). Horses can certainly be seen, weighed, measured, felt, and touched, and indeed:
"The purchase of [saddle horses, harness horses, … or any other similar animals not used directly in direct agricultural production] is subject to the sales tax unless the purchaser is a registered retail merchant and is being such animal for resale in the regular course of his business." (45 IAC 2.2-5-5).
The Indiana Department of Revenue's desire to collect taxes on sales of racehorses is understandable. According to a report issued by Purdue University, the Indiana horse racing industry generated more than $1 million in sales tax revenue in 1999 alone.